How to Apply for Bad Credit Loans

You might qualify for a loan for personal or business reasons even if you have bad credit. Bad credit loans are more expensive and difficult to obtain but are not impossible. The key to receiving one is to prepare ahead of time and be able to document your ability to pay back the loan in a timely manner. 

1. Receive your free credit score for each of the three major credit bureaus (Equifax, Experian, Transunion) from annualcreditreport.com. If you have received a credit report in the last 12 months, you will need to pay a fee to receive another. Your best course of action is to get a report from each of the three because each could contain different information. Look over the reports carefully, and report any fraudulent or suspicious activity such as a collection account that you do not recognize. You can do this by contacting the bureau with the inaccurate information and disputing the activity.


2. Consider providing collateral to the bank such as a home or vehicle you own. This can help greatly with becoming approved for a bad credit loan and can help to lower your interest rate. To claim something as collateral, you will need documentation that it is owned by you, such as a title.


3. Collect required documentation to apply for the loan such as proof of income through pay stubs, bank account statements for checking and savings accounts, tax returns for the previous year and possibly a letter from your employer stating your employment status. Choose three reliable personal references for the bank to verify.


4. Consider getting a co-signer for your loan to greatly increase your chances of being approved for a loan when you have bad credit. The co-signer will need to go with you to the bank, fill out a separate application and provide the same documentation as you, such as proof of income and bank statements.


5. Choose a financial institution that offers bad credit loans. Be sure to ask about upfront fees and interest rates before proceeding. Fill out your application fully and truthfully before meeting with the lender.